The incidence of type 2 diabetes mellitus (T2DM) has increased due to the obesity epidemic, and diabetes is projected to affect one-quarter of the U.S. population by 2050. Nonalcoholic fatty liver disease (NAFLD) is the most common form of chronic liver disease in the world with a prevalence estimated to be approximately 30% in the US. Importantly, T2DM is a major risk factor for NAFLD with ~70% of T2DM patients having a fatty liver. In patients with T2DM, NAFLD is a leading cause of end-stage liver failure as fatty liver can progress to steatohepatitis, liver cirrhosis, and ultimately liver cancer. For these reasons, a detailed understanding of the mechanisms underlying NAFLD is a public health imperative. Hepatic lipid accumulation results from disruptions to lipid homeostasis at multiple levels, including lipid synthesis. Membrane-bound, basic helix-loop-helix leucine zipper transcription factors called sterol regulatory element-binding proteins (SREBPs) are master regulators of cellular lipogenesis, controlling synthesis of cholesterol, fatty acids and triglycerides. SREBP cleavage activating protein (SCAP) binds and transports ER-localized SREBPs to the Golgi where they are proteolytically activated by the sequential action of the Site-1 and Site-2 proteases. SCAP then recycles to the ER for additional rounds of SREBP cleavage. Excitingly, recent data demonstrate that SCAP is required for development of fatty liver in both genetic and dietary rodent models of obesity-induced diabetes, making SCAP a target for the treatment of NAFLD. Based on preliminary studies, we hypothesize that proper regulation of lipid homeostasis requires SCAP recycling from the Golgi to the ER. To test this hypothesis, we will define the mechanism of SCAP recycling and evaluate control of lipid homeostasis when recycling is disrupted. We propose the following specific aims: AIM 1. TO TEST DIRECTLY WHETHER SCAP RECYCLlNG REQUIRES SREBP CLEAVAGE AT SITE-1. AIM 2. TO TEST WHETHER REGULATION OF LIPID HOMEOSTASIS REQUIRES SCAP RECYCLING. AIM 3. TO DETERMINE MACHINERY REQUIRED FOR SCAP RECYCLING. SCAP is a central regulator of hepatic lipogenesis whose loss prevents development of fatty liver disease. Our proposed experiments will define the mechanism for SCAP Golgi-to-ER recycling, an unexplored half of the SREBP pathway. These fundamental studies will reveal novel control points for lipid homeostasis, providing new therapeutic opportunities for this increasingly common disease.